Defendant was an insurance agent for a company known as API. He obtained
worker’s compensation insurance for them through NYSIF (NY State
Insurance Fund.) Plaintiff 5 Awnings Plus eventually bought API and the
defendant offered to get insurance for plaintiff.

The defendant, Moses, advised the plaintiffs to sign an agreement that
would transfer the worker’s comp insurance policy from API to 5
Awnings. Unfortunately, plaintiff didn’t know that API owed money
(premiums) on the policy and shortly after the transfer, NYSIF sued the
plaintiff to recover about $12,000, which the plaintiff wound up paying.

Plaintiff, in this lawsuit, sued defendant to recover $12,000. Plaintiff’s
theory was that defendant knew or should have known of the money owed,
and thus the defendant gave the plaintiff improper advice. The defendant
argued that the complaint should have been dismissed, and when the lower
court rejected that argument, defendant appealed to the Fourth Department.

Triggering of a Special Duty

Plaintiff, in sum, argued that defendant owed it a duty – specifically
to warn it about problems with the API policy assignment and transfer.
The court first looked at the insurance business in New York to craft
some general guidelines. It found that the applicable standard was that
“an insurance agent’s duty to its customer is generally defined
by that customer’s request for coverage.” Unless there is
a special request or existing obligation to do so, there is, as a general
rule, no requirement for the insurance agent to advise, direct or guide
the client. Plaintiffs, seeking to recover for breach of contract or negligence
must show that a specific (or special) request was made for coverage not
included in the policy. A general request for coverage is not enough to
satisfy this element.

Here, the plaintiff asked for the defendant to obtain “the best policy
value” for its insurance coverage. The court ruled that this was
the exact kind of request that was insufficient to trigger a special duty.
The words “best policy value” seem vague and like boilerplate,
not a specific or special request. The contract of transfer that the plaintiff
signed stated on its face that plaintiff would be responsible for any
amount owed.

Thus the court ruled that the elements for breach of contract had not been
met. There was no specific request for coverage that defendant failed
to meet, just general language that did not amount to a specific request.

Additionally, for similar reasons, no special duty between defendant and
plaintiff was triggered. Negligence requires a duty to be breached, and
in the insurance agent sphere, under established New York law, a duty
does not arise unless a special request for coverage was made –
which it was not in this case. Absent any kind of duty, claims for negligence
must necessarily fail.

The court reversed the lower court’s rulings and granted the defendant
full dismissal of the breach of contract and negligence claims.

It is important to retain competent counsel both when entering into contracts
and litigating disputes over breach of contract, especially in areas such
as insurance purchases that may have subtle downstream consequences. Please
do not hesitate to
contact our office for a consultation.